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Climate Change and the Decline of Labor Share

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  • Xincheng Qiu
  • Masahiro Yoshida

Abstract

We study the impact of climate change on the labor share. Combining newly constructed US county-industry-level labor shares with climate variables, we find that extreme temperatures reduce the labor share, with stronger effects in industries with higher climate exposure and automation potential. Extreme temperatures also accelerate robot adoption. A back-of-the-envelope calculation suggests that the within-county-industry response to climate change accounts for 15% of the decline in labor share since 2000. Over the 20th century, however, the opposing effects of decreased cold days and increased hot days offset each other, consistent with the historical stability of labor share.

Suggested Citation

  • Xincheng Qiu & Masahiro Yoshida, 2026. "Climate Change and the Decline of Labor Share," RFBerlin Discussion Paper Series 26143, ROCKWOOL Foundation Berlin (RFBerlin).
    • Handle: RePEc:crm:wpaper:26143
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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